Earnings per share of 15 cents missed analysts' consensus forecast by a penny, partly because the San Francisco-based firm waived a higher-than-expected $155 million of fees on money-market funds to ensure investors did not receive negative returns due to low interest rates.

Schwab had warned last month that expenses related to benefits and a new commission structure would cost an additional $30 billion in the first quarter, causing the company to curb some aggressive marketing plans for the year. Total non interest expenses at the company rose 9.5 percent from a year earlier to $959 million while revenue grew at a slower 8.5 percent pace.

"We are slowing the pace of our expense growth, but we are not cutting jobs and other areas, which is different from what a lot of others are doing," Chief Financial Officer Joe Martinetto said in an interview.

Schwab gathered money for investing in mutual funds and advisory services at a torrid pace during the first quarter, illustrating its evolution from a pioneer of discount brokerage to an asset-gathering behemoth more similar to Bank of America's Merrill Lynch than a discount broker like TD Ameritrade Holdings , he said.

"Trading revenue is going to be less and less a part of the story," Martinetto said, adding that he sees no catalyst for client trading to rev up anytime soon.

Schwab gathered $43 billion of net new assets from clients in the first three months of 2013, the most since the first quarter of 2000, and its asset management and administration fees jumped 14 percent to $552 million. Money from client trades, which at one time represented about 60 percent of Schwab's revenue, fell 9 percent to $223 million, or 17 percent of total revenue.

Schwab's net income climbed to $206 million, or 15 cents a share, from $195 million, or 6 cents a share, a year earlier. The average forecast of 24 analyst compiled by Thomson Reuters I/B/E/S was 16 cents a share.

The company repeated its forecast from February that it expects earnings per share in the mid-70-cent range for the full year and a pretax profit margin of at least 30 percent.

Schwab's profit margin in the first quarter was 25.7 percent and its first-quarter per-share earnings would translate to 60 cents annualized. Its return on equity, a key measure of profits it earns on shareholder money, was a sluggish 9 percent.

Retail brokers typically report strong first quarters as clients engage in tax-related trading and investment activities in anticipation of the April 15 deadline for filing their US tax returns.

Analysts applauded Schwab's asset-gathering momentum but noted that net income fell 2 percent from the fourth quarter of 2012 while the money-market fee waivers were the highest in four quarters. Schwab executives had said they expected the waivers to fall closer to $135 million this year, rather than the $140 million to $150 million of recent quarters.

"We think Schwab's franchise is healthy (+9% organic growth in 1Q13), but earnings power remains muted given the low rate backdrop," Nomura Securities analyst Keith Murray wrote in a note to clients. Murray kept his neutral rating on Schwab stock with a target price of $15 per share.

Martinetto urged investors to focus on the company's ability to persuade investors of its superior advisory and managed money products, which provide more stable revenue than volatile trading revenue.

The majority of new client money that Schwab now raises comes from "big banks" and "wirehouses," he said, a reference to firms such as Merrill, Morgan Stanley, UBS Wealth Americas and Wells Fargo Advisors.

Schwab has no immediate plans to use its excess cash for share buybacks or dividend increases, he said, noting low interest rates "somewhat diminish" its earnings capability and make it more dependent on capital-intensive deposit gathering within its bank subsidiary.

Schwab's long-term policy remains to return to investors 20 percent to 30 percent of its earnings.

"As earnings improve we will look at raising the dividend, but not this quarter," Martinetto said.

Shares of Schwab were down 22 cents, or 1.2 percent, to $17.06 in late morning trading on the New York Stock Exchange.

(Reporting By Jed Horowitz; editing by John Wallace, Sofina Mirza-Reid and Andrew Hay)